Mixed Bag Of Results

Amid supply growth and the GST, India hotel performance remained stable during Q1

By TEAM STR Global

India’s hotel occupancy dipped 0.1% during Q1 2018, but a 1.2% increase in average daily rate (ADR) allowed hoteliers to grow revenue per available room (RevPAR) 1.1% compared with the first quarter of last year.
STR analysts cite supply growth (+3.4%) as an underlying reason behind a nearly flat Q1 occupancy level of 68.7%. That is evident as demand (room nights sold) grew at a healthy pace (+3.3%) in year-over-year comparisons. While the influx of new supply in the market influenced occupancy levels, it was not enough to pull ADR comparisons into negative territory. India recorded an absolute ADR of INR 6,278.48 for the quarter as the country continues to build on ADR momentum developed in 2016 and 2017.
Any potential impact from the Goods & Services Tax is yet to be seen, but STR expects the GST to slow ADR growth in the future. Luxury and Upper Upscale class hotels seem to be the most affected as room rates above INR 7,500 will be charged a GST of 28%. Similar to the national performance, STR did not see such an impact during Q1 2018.
Luxury hotels posted a 1.8% increase in ADR to INR 11,349.64, while Upper Upscale properties grew ADR 2.8% to INR 7,104.73. Among the segments, Luxury hotels actually recorded the highest occupancy increase for the quarter (+2.8% to 72.4%) thanks to demand growth (+4.5%) boosted by domestic demand and economic conditions in the country.
Overall for India, the e-visa program introduced in 2017 ought to boost travel to India as it is easier for business and leisure travellers to now enter the country.

At the market-level, Goa continued to lead performance as the country’s top leisure destination. Thanks to a 3.8% increase in demand, the state registered a 2.2% lift in occupancy that drove a 2.1% rise in RevPAR to INR 7,111.95. According to Goa’s Department of Tourism, the market welcomed nearly 8 million tourists in 2017, which was a 23% increase from 2016. With its natural scenery, unique beaches and cultural diversity, Goa sees most of its business from domestic tourism, as international tourist made up just 11.4% of the aforementioned 8 million tourists last year. Domestic tourism is booming in the country due to the rise of India’s economy and the growth of spending in the middle class.
From a hotel supply standpoint in Goa, STR expects 2,000 rooms to be added to the market in the next five years—a majority of supply growth will occur in the upper tier classes with properties like Banyan Tree Goa, Delta Hotels by Marriott Goa and Jumeirah Goa. In 2018 specifically, Hilton will open a pair of flagship hotels in the market—Hilton Goa Resort and DoubleTree by Hilton Goa Panaji.
With strong tourism and market resiliency, Goa should be ready to absorb this new supply and continue positive performance trends.

India’s largest city continued to be the busiest as a financial hub of the country. Steady year-over-year occupancy performance (+1.2% to 80.9%) allowed growth in RevPAR (+2.7% to INR6,951.37) to continue. Mumbai has benefited from being the commercial capital of one of the world’s fastest-growing economies. From a leisure perspective, Mumbai is a transit hub for various destinations in India.
STR expects more than 1,600 new rooms to come online in Mumbai over the remaining months of 2018, including rooms from global brands such as Ritz-Carlton and Hilton Garden Inn. The opening of the Bandra-Kurla Complex Convention Centre is expected to significantly boost performance in the city and its peripheral areas.

For more details contact:
Vidhi Godiawala, business development manager, Central and South Asia, STR : VGodiawala@STR.com

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